Self-Employed
Since I have recently opted for non-real estate related self-employment, I have been told that I must wait two years to build up my balance sheet to obtain financing for a real estate investment. Are there any creative ways around this (ie. hard money lender) so that I can still invest in real estate? Any help or suggestions are greatly appreciated.
Kevin,
There are thousands of loan programs out there. If you qualify you may be able to get a loan. There are full doc, no doc, stated, ect. There are even loans that don't require you to have a credit score. You need to find someone in your area to help you out
Kevin, a quick simple way to avoid your situation is do not be self employed. Start a business of your own. Work for that business. Make it legit, in all ways with license. permits, etc.,as are required on your area. Fill out an employment app,(for yourself) and put it into the business file. You are accomplishing the same results, and the lenders will be much more at ease. They are happier if you are a working stiff at 20K per year than they are with your being self employed making a 100K. It don't make sense, it just is their mentality.[ Edited by ozzie on Date 03/21/2004 ]
Ozzie
Interesting
That is the first time I ever heard that Idea.
JohnNH
This is good information- so just "act" like I work for my own organization. What if they want to confirm ownership or management?
Kevin,
Go to the secretary of state for VA online, and find out what you need to do to set up a LLC or company. You will become an actual business, where you can be president. That should take care of that.
On another note, you don't have to get loans from your traditional sources, sometimes you can work with the seller to keep things in their name, change the title, and you make payments.
Kevin, you can verify employment via fax, phone, or mail. They can verify employment, via checking first the company exists. If someone calls to verify information, if you work there, how long, what your wages are etc,,, I am sure you could figure a way to verify it Be honest., do have the company/business, treat it like a business, pay your self wages, or a draw. And do have an employment app fot you on file. I am an employee of my company. Ot makes my creditors much more at ease that I have a job, rather than being self employed. And I like them to be happy.
Telling people you work for a company is not enough. You must show w2's and sign a 4506. So you must actually take out the neccesary taxes to do it this way. A paystub is required. If you are going to be a 1099 employee. You must show last quarter p&l statement and only 75% will be used.
I don't think you have to provide W2 info and all those other forms- isn't that the purpose of a no doc loan? I would imagine you can show your most recent pay-stubs provided by the "company accountant" without have to provide other documents.....correct?
Kevin,
This a great thread, lots of good ideas. In addition to those suggestions, you can use table funding, which is one of several ways to use a simultaneous close with you as the buyer.
Of course, you would need the seller to have some motivation of their own to sell their property, and be willing to take a discount on the sale of the new 1st lien that would be created and purchased at the closing table. This takes equity as well.
But structuring a new 1st mortgage or deed of trust note to be purchased at closing by note investors is another creative financing technique you can use to get around being self-employed.
The note investors will look at your credit profile and other abilities to pay, but these deals can happen more quickly, and put you under less scrutiny.
Talk to you soon and good luck, Dave
Another option is to go to lenders that don't underwrite using these same standards, i.e. the sellers.
_________________
Mark Reynolds[ Edited by JohnLocke on Date 03/31/2004 ]
Kevin,
Actually even with a no doc loan you may have to provide proof of employment. Some lenders have required a w2 with only the income blacked out. And most lenders are now requiring a 4506 being signed even for stated and nodoc loans.
Lori
[addsig]
Kevin,Set up a C corp. and become president and draw a salary. Lenders love people who have a steady income. Find a creative mortgage broker they have hundreds of programs.
Most of the lenders I've talked to say that you're self employed if you own more than 25% of the entity that employs you.
I recently went through this problem trying to get my first home. If you have a substantial down payment (10 to 20%) then you can do things like stated income etc. My aunt works as an office manager for a place that does owner financing and I was able to get a loan through her with only a 7% down payment.
You may get stuck with a high interest rate as well.